Takeover target Revolution Bars has rejected the latest advance from Britain’s biggest nightclub operator to merge the two firms, instead saying it would prefer a cash offer.
Deltic last week proposed an all-paper merger that would see embattled Revolution own 65% of a combined entity and Deltic the remaining 35%, creating a bar giant with annual sales of more than £270 million.
However, Revolution has so far favoured a takeover offer by Slug And Lettuce owner Stonegate, which struck an agreement in August to acquire it in a £101.5 million deal.
Revolution, which owns more than 60 Revolution and Revolucion de Cuba high street bars, said of Deltic’s approach: “The board does not believe that the merger proposal would create shareholder value for Revolution’s existing shareholders in excess of the certain and immediate value represented by the recommended 203p cash offer from Stonegate Pub Group.
“The board encourages Deltic to make a cash offer for Revolution rather than continuing to focus on its current merger proposal.”
Revolution shareholders are due to meet next week to vote on the Stonegate offer.
The latest twist in the takeover saga comes after Revolution revealed earlier this month that annual profits fell by 29% to £3.6 million and cautioned over cooling autumn sales.
The Ashton-under-Lyne-based firm has been knocked by a sector-wide surge in costs, including the impact of the living wage and the new apprenticeship levy, as well as an above-inflation increase in business rates.
Deltic is now urging Revolution shareholders to vote against Stonegate’s offer – suggesting it undervalues the company – and instead “encourage” the board to advance the merger proposal to a point where it can be put to a vote.
The nightclub owner accused Revolution of failing to gain a “genuine understanding” of Deltic, and had instead created a backdrop of “hostility, negativity and ill-informed commentary.”
Deltic chairman Bob Brannan said: “Deltic is incredulous that (non-executive chairman) Keith Edelman, the only Board member of Revolution who has had any contact with Deltic in respect of the merger proposals, and its advisers can, given feedback from Revolution’s shareholders, continue to recommend Stonegate’s offer at a price below both the current Revolution share price and all broker estimates whilst refusing to have any meaningful engagement with Deltic and demonstrating a limited understanding of the nightclub market.
“If Deltic succeeds in implementing its Revised Merger Proposal, it will adopt a very different approach to the stewardship of shareholders’ capital.”